Robust referencing – lessons from a lucky escape

From Landlord Focus magazine article – Autumn edition 2024

It is important to take your time and carry out all necessary checks when choosing a new tenant. Making the wrong decision can be a costly move

One SAL member had a close call in May of this year after he engaged a letting agent to find him a tenant. The agent had carried out reference checks on a prospective tenant and the member was concerned because, as the tenancy start date approached, there seemed to be a problem with payment of the first month’s rent. The tenant said they had sent it by bank transfer and supplied a receipt for the payment from their bank, but the agent’s bank were unable to locate the payment. The tenant meanwhile was putting pressure on the agent to allow them to move in, as they had a removal van booked. At this point, the member contacted SAL for advice. He was advised by SAL that this payment problem was extremely unusual and a red flag. He was advised not to allow the tenant to move in until the payment issue was resolved.

The member then got back in touch to report that he had done some searches on the tenant’s name on the internet and discovered that they had a conviction for fraud.

He also searched for their name on the tribunal’s decisions database and discovered that they had recently been evicted for rent arrears in a case which involved the tenant allegedly falsifying paperwork to deceive the tribunal, owing over £12,000 in rent and delaying the eviction with an unsuccessful appeal to the Upper Tribunal. In light of this information, it is suspected that the receipt the tenant had supplied for their banking transaction was fraudulent. Luckily the tenancy agreement had not been signed and so the landlord was able to walk away and find alternative tenants.

It was clear that the letting agent’s reference checks were inadequate and had not involved an internet search or a check on the tribunal’s decision database. These are essential checks which should be conducted on all prospective tenants to reduce the risk of ending up with a problem tenancy.

Outsourcing referencing checks

Many landlords and letting agents outsource tenant vetting checks to tenant referencing companies. However, most of these companies are based in England and do not conduct a search of the Scottish tribunal decisions database when carrying out their checks. SAL has teamed up with FLS Tenant Referencing to provide members with a reference check service which does include this vital check. SAL members can access the FLS Tenant Referencing service at a discounted rate and their service includes checking:

• The First-tier Tribunal for Scotland (Housing and Property Chamber) (FTT) decision database
• For any history of sequestration, bankruptcy or insolvency
• That they have lived at the addresses given and that they are who they say they are
• That they are employed and/or earning the amount they claim to be
• That they can afford to rent
  your property
• That there have been no concerns with their current tenancy

DIY referencing

If you prefer to carry out tenant referencing checks yourself, then ask your prospective tenant to fill in an application form – you can find a SAL template for this here.

Below are details of checks that landlords might like to consider conducting:

1. Do an in-person viewing – this is your opportunity to meet the prospective tenant, show them around the property and get a feel for what they are like and whether you will get on in a landlord-tenant relationship.
2. Proof of identity – ask tenants to provide photographic ID such as a driving licence, passport or national insurance (NI) card. NI numbers are particularly useful when pursuing current and former tenants who owe rent, so keep a note of these on file.
3. Proof of address – ask for proof of their current address such as a utility bill, driving licence or bank statement. Search this address on the landlord register here to see if it is a let property and if so, request a reference from the landlord (see point 11 overleaf).
4. Check residence status – ask for evidence that the prospective tenant has the right to live in the UK. Although this is not a legal requirement in Scotland as it is in England, it is still a sensible check to carry out. It can most commonly be evidenced via a UK passport, visa or residence card. To avoid breaching discrimination legislation landlords who wish to carry out such checks should do so on all applicants, not just those who are, or appear to be, from overseas.
5. Check for previous FTT eviction and civil proceeding decisions against the tenant on the tribunal’s website here via this link. Simply enter the tenant’s first name or surname (or both) into the “Name of Party” box and click “apply” (see screenshot of these boxes below). Always look into the detail of any case as sometimes the tenant will not be at fault.
6. Carry out internet and social media searches on the applicant’s name. Occasionally this can unearth information that they have not disclosed, such as owning a pet or criminal offences.
7. Credit check – some landlords may wish to run a credit check on tenants to verify their details and see if they have had financial difficulties in the past. There are a number of websites which offer this service, including a “statutory credit report” which is free to obtain. The tenant will have to complete the application form themselves.
8. Bank statements – as an alternative to a credit check, or to provide additional security, you might like to ask to see your prospective tenant’s current account bank statements covering the last few months. Check these for evidence of income, a stable account balance and, in the case of tenants who are currently renting, check for evidence of rent payments going out to their landlord. It is common for landlords to apply affordability criteria which require a tenant to have an annual income of 2.5 or 3 times the annual rent.
9. Obtain a reference from the tenant’s employer/pension provider/accountant – this should detail their job title, contract duration and/or annual income. If the tenant is on benefits, consider asking to see evidence of their benefit entitlement.
10. For students, ask for a letter from their university confirming their student status. For students funded/paid by an organisation or government, ask for evidence of paid income or funding for living expenses.
11. Landlord reference – if the tenant has lived in rental accommodation in the past, then obtain a reference from their former landlord/letting agent. This should state the tenancy dates, monthly rent due, details of any arrears, whether the property was kept clean and tidy, whether deductions were made from their deposit and whether there were any problems with anti-social behaviour or other breaches of the tenancy terms.
12. Consider visiting the tenant in their current home – this is not always possible or appropriate but some landlords find it a very useful way of finding out more about the tenant and how they are likely to look after their property.

If having completed financial checks you have concerns about affordability you could consider asking for a guarantor (see SAL’s factsheet on guarantors) or asking the tenant to pay the first few months’ rent upfront (the maximum you can ask for is rent for the first six months in advance).

If your referencing checks reveal any concerns or something just doesn’t feel right, then do not be afraid to reject the application. Do not fully sign the lease or allow the tenant to move in until all your background checks are complete and you have received the first month’s rent and full deposit. You are not tied in until the tenancy agreement is signed by both parties.

The consequences of selecting a problem tenant can be very significant so it is worth spending time carrying out thorough tenant vetting before it is too late.

Tenant referencing for Scottish landlords and agents

The Scottish Association of Landlords have teamed up with FLS to provide sophisticated tenant referencing, driven by the latest technology and a team of referencing experts. Read more about their services here.

Minimise the risk of rent arrears and problem tenants by carrying out a detailed tenant reference and background check on your prospective Scottish tenants. For further peace of mind, our tenant references are eligible for rent guarantee insurance from leading providers (subject to terms).

SAL members will receive discounted prices on all references;  however, you do not need to be a member of SAL to use our Scottish Tenant Referencing service.

How much does it cost?

Cutting-edge technology and first-class due diligence from an expert referencing team.

• Check the First-tier Tribunal for Scotland (Housing and Property Chamber)
• Find any history of Scottish sequestration, UK bankruptcy or insolvency
• Confirm they have lived at the addresses given and that they are who they say they are
• Check that they are employed and/or earning the amount that they claim to be
• Generate an affordability calculation
• Validated reference that is eligible for rent guarantee insurance

To find out more or start a reference check please follow this link.

Not yet a member of SAL? Join today.